Finding a good product-market fit can be a game changer for your business. According to the Dallas digital marketing company, it is so vital that it can scale up your business manifold times within a very short period.
What Is Product-market Fit?
A product-market fit can be defined as identifying a market that has a sufficiently good amount of demand for a product or service you are offering. A product that fits sufficiently well enough into the market will have a pull demand from the customers.
In such a scenario, your business need not push the product into the market, or in other words, you do not have to initiate a push-marketing tactic to initiate and drive sales.
The pull of the product from the market will be so much that customers not only become regular and loyal buyers, but they also turn into product advocates, generating awareness for the product, letting their close and near ones or like-minded associates know about the products, etc. When this happens, word-of-mouth advertising for the product happens on its own.
Sounds good? But, top digital marketing companies in Dallas caution us here. Consider the following data to understand the working dynamics of finding a good product-market fit.
- According to recent data, 10% of startups shut down their shops in the first year, and further, by the end of the tenth year, 90% of the startups would have already failed.
- According to research conducted by renowned business analytics and research firm CB Insights, 35% of the failed startups had products that did not have any market demand or need. “No market need” also was among the top two crucial factors for start-up failure.
- Further data states that around 80% of new products launched every year fail to register enough sales.
How to Determine Product-market Fit?
If you build a fabulous product but cannot find a market for it, it would be probably the worst nightmare for you as an entrepreneur. On the other hand, finding a good market fit for your product is vital for exponential growth and achieving leverage in the market.
Finding a stable, reliable, and responsive product-market fit requires analyzing the forces of the market and the customer dynamics and then aligning them with your company’s products or service offerings.
Analytical Metrics To Determine Good Product-market Fit
Generally speaking, there are a few good analytical tools to identify good markets, or segments thereof, about your products. Let us discuss them briefly below.
The Sean-Ellis Test or the 40% Rule
Among various other KPIs (Key Performance Indicators), the Sean-Ellis Test is considered the gold standard for evaluating and determining whether or not your product has a good market pull demand.
It says that if your existing customer is surveyed about your product and at least 40% of them respond that they would be “very disappointed” if they did not get your product or service in the future, it invariably means that for a minimum of 40% of the market, your product is a must-have product. The best digital marketing agencies in Dallas agree that you have got a win-win situation here. You got a good product, and you already have a significant number of customers who want your product badly enough.
Analytics Metrics for an Online Business
The advantage of the Sean-Ellis test is that it can be used across industries, customers, products, and demographics. We will look in detail at the Key Performance Indicator or KPI analytics metrics for an online business to determine whether a product-market fit is favorable or not.
- Bounce Rate
If the bounce rate of visitors to your website is low, it means that customers are getting what they are looking for and their expectations are met. It is the first major piece of good news.
- Time on Site
If a customer spends more time on your website and product page, it means the visitors are more likely to consider buying your product.
- Pages per Visit
If the customers visit and browse through more pages on your website every time they visit, it means they like to stay on your website and have a good time and experience navigating through – in short, it indicates a good user experience.
- Returning Visitors
If the same visitors are returning to your website on a regular and frequent basis, and the number of returning visitors and their visits increase it indicates that the product or service has a lasting impact on them.
- Customer Lifetime Value
This indicates the profitability a customer brings in terms of value for your product and company. If the above metrics perform above average, the customer lifetime value would be high, indicating a good product-market fit.
According to the Dallas digital marketing agency, maybe it is the perfect time to scale up production and speed up operations because the pull demand for the product is natural and high.
Solution vs Product Dilemma – Why Does a Good Solution Need Not Be a Good Product?
The very crux of a good product is that it solves a pressing problem for the customers. While that should be a good measure for a product-market fit, in reality, it is quantifying for a problem-solution matrix.
While the customer’s desire for a particular solution may not result in their demand for the product. Thus, according to the best digital marketing agencies in Dallas, product-market fit analysis becomes even more important to determine whether your products specifically have achieved a state where customers willingly have the least resistance to buying them.
The Importance of Product-market Fit
If the customers’ desirable solution is taken as a concrete matrix, it may sometimes mislead and backfire. Therefore, a more specific product-market fit matrix becomes all the more important.
- Proper Positioning of Your Product
Identifying that you have created a product that fits the market, helps you to position your product well for your market. You will understand where your product stands among the competitors and other market players and how specifically customers are buying your products.
Once you can identify the kind of attraction your product generates for your target market, you will be able to position your product with better deals that will further seal and grow the customer base.
- Identifying the Correct Segment
You might be creating a product by solving a universal problem, but it may so happen that a particular demographic of the market or segment of the customer base may respond more favorably to your products than the others.
The Dallas digital marketing agency believes that when you find your target market, you will also be able to identify the exact segment within the customer base that needs your product more than anything else. It will also give ways to further penetrate the market and dominate the segment.
- Strategy To Scale Up Production and Operations
Until the product finds a good and fit market, its production should not be scaled up. Once a product’s market fit is established, you will readily know that the demand exists, and the market pulls your products like a suction pump.
It now remains to be seen how better your products perform when the production is scaled up, and the supply chain is expanded and established.
- Determine Right Investments
Most investors are just waiting for the opportunity to find a product that has found its target market.
Until this point is reached, heavy investments often backfire into unwanted failures. But, once a product-market fit is established, the right finance can be gathered to scale up operations, production, and supply chain efforts.
Companies, especially online businesses, must analyze their product demands concerning the market’s needs. Many such business enterprises find it difficult to gauge the product’s real market fit. It is where professional digital marketers such as the Dallas digital marketing company can help you. Get a good product-market fit and watch the sales register ring big bells for your business.